MFJ or MFS

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					For Immediate Release
Contact: Gigi Thompson Jarvis
gjarvis@naea.org, 202.822.6232, x119


                                  Choosing Your Tax Return Filing Status
                                        Married Couples Do Have a Choice

WASHINGTON, DC     (February 16, 2012) -- Conventional wisdom among taxpayers has long held that married
couples are better off filing their tax returns under the “Married Filing Jointly” (MFJ) status rather than using an
alternative filing status for married couples, “Married Filing Separately” (MFS). Like most things in life, however,
it depends on the specific circumstances. To ensure they’re not paying any more than they have to, many
taxpayers run the numbers both ways, to see if one filing status reduces their tax burden more than the other.
The IRS actually encourages you to choose the one that saves you the most on taxes – whoever said they don’t
have a heart!

If you have a young family, IRS “special rules” apply to those filing federal returns separately that are usually not
good for your situation. Generally, those filing separately can’t take the credit for child and dependent care, the
earned income tax credit, or the exclusion or credit for adoption. Separate filers may not claim the education
credit nor deduct the interest from student loans, nor take the tuition and fees deduction. They cannot exclude
from income the interest from savings bonds used for higher education expenses, and the first-time homebuyer
credit is only $4,000, as opposed to $8,000 for those filing jointly. The beginning phase-out level (adjusted gross
income) for retirement savings credit is one half of the amount for MFJ; however, there is a sliding scale phase-
out, depending on the number of dependents that qualify for the child tax credit. Since tax laws are known to
contain “exceptions to the rule,” if you are in doubt as to any exceptions that may apply to your situation, you
would be wise to consult a tax expert – an enrolled agent.

Those IRS “special rules” make it appear that married couples are better off filing jointly, but again, it depends
on your situation. If you have high medical bills for the year, you may be able to claim medical deductions filing
separately that you would be unable to claim filing jointly if your adjusted gross income on an MFS return is
lower than it would be on a joint return. And it’s not uncommon for you and your spouse to fall into a lower tax
bracket filing separately than you would filing jointly, especially if none of the disallowed credits mentioned
above applies to your situation. Married Filing Jointly requires you report your combined income and your
combined allowable expenses. Two people with good incomes could fall into the 25 percent tax bracket on their
own, and be boosted up to 28 percent when filing jointly.

“Even if you do fall into a lower tax bracket filing separately, you’ll still probably come out better filing federal
returns jointly,” said Lynn Schmidt, EA of Lynco Financial and Tax Services in Winter Haven, FL. “Your
exemption amount for figuring the alternative minimum tax when filing MFS will be half of what it would be filing
MFJ. Your capital loss deduction rate is $1,500 instead of $3,000. And, as a separate filer you can only claim
the standard deduction if neither you nor your spouse itemizes deductions. If neither of you itemizes, you can
claim the standard deduction, but your basic standard deduction is half of what it would be if you were filing
jointly. However, state tax rules can change the equation, and sometimes favor filing separately.”

A licensed tax practitioner who is familiar with the numerous rules that affect filing status will be able to tell you
which filing status is most advantageous for you.

About Enrolled Agents
Enrolled agents (EAs) are America’s tax experts. They are the only federally-licensed tax practitioners who
specialize in taxation and also have unlimited rights to represent taxpayers before the IRS. While attorneys and
certified public accountants are also licensed, only enrolled agents specialize exclusively in taxes. Enrolled
agents are required to complete many hours of continuing education each year to ensure they are up-to-date on
the constantly changing tax code and must abide by a code of ethics. To locate an enrolled agent in your area,
go to the “Find an Enrolled Agent” directory at www.naea.org.

				
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